Value analysis is a technique to examine the functions of an item or product to determine if costs can be reduced while maintaining or improving functionality. The value equation defines value as benefits received divided by price paid. For example, the value of healthcare services can be calculated as the magnitude of patient improvement divided by the cost of care. Solving value equations and inequalities involves determining if the expression inside the absolute value is positive or negative.

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VALUE EQUATION
By MANISHA VAGHELA

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FLOW OF PRESENTATION
• Introduction of value analysis
• What is value?
• Definition of value analysis, value equation
• What is value equation?
• Example of value equation
• Conclusion
• Review of the topic
• Bibliography

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INTRODUCTION
• In dealing with the technique of value analysis
first of all it is very important to understand the
meaning of the term ‘Value’.
• Value means a measures of satisfaction one gets
from the acquisition of an item or service.

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Cont…
• Value analysis is an important technique in the
hands of business and industrial management in
modern times. It is often talked about in context
of materials management and purchasing
research. Quite often the name of LAWERENCE
D. MILES of USA is associated with this
technique for he was the first to develop it
during second world war and as such he is
known as the father of Value Analysis technique.

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Cont….
• Value analysis is a study of character-wise cost of an
item such as quality, design, methods of manufacture,
consumption aspect etc. with a view to reducing the
ultimate cost of the item. Value analysis also refers to
the determination of the value of items proposed to be
brought so as to examine the worth to be spent in buying
those items.
• Purchasing research helps in this direction by
supplying requisite data directly for the purpose. Value
analysis takes into consideration the quality of the
material in relation to its functional value and price.

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Cont…..
Also, value analysis helps in taking decision about what is
actually required and what should be paid so as to derive the
maximum benefit but pay the minimum for the same function.
This reduces the cost of purchases and enhances the profits of
the organization which is of course the goal of any value
analysis system.
Moreover, as applied to industry, VA involves a continuous
supervision of value at each stage namely design, purchase,
manufacture, packing, transportation and so on with a view

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Cont……
to reduce the overall cost with the increase in the worth of the
product.
Let us see few examples of value analysis:
 A boy wants to purchase a bike. On receiving information, a 2
stroke bike costs Rs.30000 where as a 4 stroke bike costs
Rs.35000.at the same time average of 2 stroke bike is 36km/lt
whereas the average of 4 stroke bike is 70km/lt. A value analysis,
thus, reveals that the second one initially costlier but it gives better
value for the money. Hence the 4 stroke bike is recommended.

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Cont…..
For plastic filament industry, to cut the filament there are
various types of blades available in the market. Bharat blade is
one of them which is inferior in quality and is 70 paisa per blade.
Another one is 7’0 clock blade which is superior in quality
costing Rs.2 per blade. The functional values of both the blades
are the same. Also there is a possibility of fewer changes in the
durability of both the blade. Both the superior and inferior quality
blades will serve the same purpose without much variance in the
services. The inferior quality may be recommended because of
the almost same functional value and cheaper in price in
comparison of both the blades.

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What is Value?
 Based on these classifications, value is defined as “the
minimum money which has to be expended in purchasing or
manufacturing a product to create the appropriate use or
esteem factors.”
 We could now define value analysis as “ an organised
creative approach which has as its objective- the achievement
of the value of the product.” value analysis aims at reducing
the cost value to the value of the product.

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Definition
Value analysis:
A systematic and analytical technique used
to examine all the functions of the existing item,
product, product system or activity in order to
determine if a cost item can be reduced, while
maintaining or improving the functional
requirement.

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Definition
• Value equation
A mathematical statement used to evaluate a value.
An equation can use any combination of mathematical
operations, including addition, subtraction, division, or
multiplication. An equation can be already established due to
the properties of numbers (2 + 2 = 4), or can be filled solely
with variables which can be replaced with numerical values to
get a resulting value. For example, the equation to calculate
return on sales is: Net income ÷ Sales revenue = Return on
Sales. When the values for net income and sales revenue are
plugged into the equation, you are able to calculate the value
of return on sales.

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14. Value equation
The use of a value equation is intended to help the purchaser of health
care service make an informed decision regarding the value of the
services. While value may be calculated in a number of different ways,
one method that is well suited to behavioral healthcare is to define value
as the magnitude of improvement (as measured by an outcome
questionnaire) divided by the cost of care. Employers have a particular
interest in estimating the value of services because the employee's
improvement in symptoms and functioning that potentially results from
mental heath and/or substance abuse treatment services have a direct
impact on the employer's bottom line in the form of improved worker
productivity. The value of behavioral healthcare services can vary due to
a number of factors, including the type of treatment and cost of the
services. However, the value of the services also vary due to differences
in the effectiveness of individual clinicians, since all treatment effects
are
to some degree mediated by clinician effcts.
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17. VALUE EQUATION
In mathematical language, value can be defined as;
• For producer:-
value = use + esteem
cost
Where Use = the power of a thing to serve an end
user.
Esteem = the power of a thing that makes us desire
its possession.
In simple sense value can also be derived as
value = function/cost
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18. Cont…
• For customer :-
value = use + esteem
price.
Thus when we talk about cost improvement we
are talking about decreasing cost by increasing
the value of the product or service i.e. by giving
high value at lowest cost and satisfy its use and
esteem.
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The Value Equation
• There is no doubt that consumers are increasingly savvy
and demanding about the value of the goods and services
they purchase. The mistake that many retail marketers
make is equating “value” with “price”. They are not one
and the same thing.
• The true equation is “value=price+ quality”. Both
attributes co-exist in a delicate balance. Bala and Green,
executives at The Cambridge Group in Chicago, state
that: “From the customer’s perspective, value has two
components: the benefits received and the price paid.
Value increases as benefits are added at the same price
point or as price is reduced for the same benefits.”

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Value E QUATIONS
You can solve some absolute-value equations
using mental math. For instance, you learned that
the equation | x |= 8 has two solutions: 8 and −8.
To solve value equations, you can use the fact that
the expression inside the absolute value symbols
can be either positive or negative.

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Solving Value Equation
Solve | x − 2 | = 5
S OLUTION
The expression x − 2 can be equal to 5 or −5.
x − 2 IS POSITIVE
IS POSITIVE x − 2 IS NEGATIVE
|x−2|=5 |x−2|=5
x − 2 = +5
+5 x − 2 = −5
x − 2 = −5
x=7
x=7 x = −3
The equation has two solutions: 7 and –3.
C HECK | 7−2|=|5|=5 | −3 − 2 | = | −5 | = 5

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S OLVING V ALUE I NEQUALITIES
S OLVING ABSOLUTE- V ALUE E QUATIONS AND
I NEQUALITIES
| ax + b | < c means ax + b < c and a x + b > − c.
| ax + b | ≤ c means ax + b ≤ c and a x + b ≥ − c.
| ax + b | = c means ax + b = c or a x + b = − c.
.
| ax + b | > c means ax + b > c or a x + b < − c.
| ax + b | ≥ c means ax + b ≥ c or a x + b ≤ − c.

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When an absolute value is less than a number,
the inequalities are connected by and. When an
absolute value is greater than a number, the
inequalities are connected by or

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conclusion

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Review of the topic
• Introduction of value analysis
• What is value?
• Definition of value analysis, value equation
• What is value equation?
• Example of value equation
• Conclusion

26. BIBLIOGRAPHY.
 An Introduction to Operation Research
- C.R. KOTHARI
 Production and Operation management
- DR.CHUNAWALLA
- DR. PATEL
 Production and Operation management
- N.G.NAIR
 Materials Management
- M.M.VARMA
 Production and Operation management
- R. PANEERSELVAM
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27.  Production management in developing countries
- V.S.RAUT.
 Production and Operation management.
-K.ASHWATHAPPA
 Purchasing and material management.
- WILBUR
B.ENGLAND
- MICHEIL R.
LEENDERS
 INTERNET
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